The ongoing dispute between Punit Goenka-led Zee Entertainment and American investment firm Invesco seems to be heading towards a resolution with the latter expected to back the merger deal with Sony as long as the Goenka family does not get any preferential equity (PE).

‘No dilution for others’

According to industry sources, Invesco views the merger as a positive for the Indian broadcasting firm but wants clarity over the contours of the deal, especially in how the group would increase its stake from 4 to 20 per cent in the merged entity.

“The only thing Invesco has asked for in the transaction is to know how promoters will be increasing their shareholding from 4 to 20 per cent. There should not be any dilution for other shareholders. If it happens from open market purchases by Goenka instead of preferential equity, then Invesco will vote for the merger,” said an industry source.

Open market acquisition

Another source said that Goenka is unlikely to get any preferential equity and may acquire additional stake from the open market.

“Promoters will be able to purchase additional shares at the open market price, and not at a discounted price through the preferential shares route,” the second source said.

Invesco, the largest minority shareholder in Zee Entertainment Enterprises, has been in a bitter legal battle with the Zee board over the removal of MD and CEO, Punit Goenka, from the company’s board over corporate governance issues.

Lack of clarity

Zee and Sony had earlier announced a plan to merge the two businesses, giving Goenka and his father Subhash Chandra 4 per cent stake initially, which can be scaled up to 20 per cent.

A press release issued by the company did not clarify how this increase would happen except that it will be “in a manner that is in accordance with applicable law”.

The lack of clarity in this clause raised alarm bells in the Invesco camp. Invesco had earlier stated that it did not necessarily oppose the merger, as long as it is approved by Zee shareholders.